Jeremy Corbyn's bill for nationalising energy sector costed by City at £185bn

Nationalising the major power providers, as suggested by Labour leadership candidate Jeremy Corbyn, could cost £185bn, according to leading City analysts.

Following a report in the Financial Times in which Corbyn discusses an ambition to take control of the big energy companies, analysts at Jefferies stockbrokers concluded there would be a number of hurdles to this idea. They cite European Union law and stock exchange rules which require an offer for a whole company to be made once a shareholder owns 30% of the shares.

Corbyn is quoted in the Financial Times (£) as saying: “I would want the public ownership of the gas and the National Grid … [and] I would personally wish that the big six were under public control, or public ownership in some form.”

The MP for the London seat of Islington North since 1983 is attracting support for his leadership bid.

Corbyn is said to want to take stakes in British Gas, SSE, E.ON, RWE npower, Scottish Power and EDF, as well as the National Grid. In the FT, Corbyn is quoted as saying: “You can do it by majority shareholding; you can do it by increased share sales, which are then bought by the government in order to give a controlling interest.”

The Jefferies analysts said: “Such a policy would face many hurdles, such as compatibility with EU law, but if it was implemented how much might it cost? In his interview, Mr Corbyn suggests that the government could take a majority equity stake in the utility companies. However, under stock exchange rules, once a stock holding hits 30% an offer for the whole company must be made. Therefore, we assume that all of the equity would be acquired.”

According to their analysis, the cost would amount to £185bn based on the entire market stock market value of the companies. But, they said: “If a future Labour government restricted itself to just acquiring the UK assets of the big six generators plus National Grid, the cost would be £124bn.”

They assumed that the shares are bought at current prices and not at any higher price, which might be expected from a takeover, to calculate an enterprise value – the debt and equity – for the companies. For companies which are not directly listed on the market and are part of bigger groups – such as EDF or E.ON – the analysts have used valuations of just the UK operations.